He is the founder and CEO of The Socratic Experience, a virtual school that equips students for lifelong happiness and success through Socratic dialogue.
Alongside his work in the US, he has educational consulting experience in multiple developing nations.
And… he’s a fellow Minnesotan!
Michael joins the show to discuss whether Socratic education can scale, the benefits of the Mormon model, why high agency is the default, and MUCH more!
I hope you enjoy this conversation as much as I did. We’ve shared some highlights below, together with links & a full transcript. As always, if you like what you hear/read, please leave a comment or drop us a review on your provider of choice.
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Highlights
High Agency is the Default
“I'm a big believer that high agency is the norm for humanity. Just going back to traditional cultures around the world, at puberty, there was a rite of passage, and the young man was supposed to go out and hunt his first deer at 12, 13, or whatever. And this was really pretty universal. In just the US tradition, people like Ben Franklin, Thomas Edison, Andrew Carnegie, John Muir, at the age of 13 or so, they were out working. And so it used to be the norm to take tremendous responsibility at 12 or 13. And I would say, for a lot of reasons, including compulsory mass education, we've systematically deprived young people of their agency. One thing people don't know, is both the term teen and adolescent were invented in the early 20th century. We didn't even use to have concepts for these, because you were simply a young adult, going out and doing things.”
The Strengths of the Mormon Model
“Utah has the highest rates of social mobility in the US, despite the lowest per pupil spending in the US. Basically, Utah social mobility is about the same as Denmark, which is considered sort of an ideal of social mobility. What is it? It's Mormon culture. Now, I'm not Mormon, but I have huge respect. I see the Mormons having designed a brilliant technology of agency and self empowerment. They have, for instance, these accountability groups, where young people interact with each other and it's within the framework of the LDS church, but there's no reason we couldn't create secular counterparts. I would say I work to create secular counterparts. A lot of it is we do need other people to help us be accountable.”
Who Are You Going to Kick Out?
“I think it comes down to, as an entrepreneur, as a leader, being able to make decisions based on the principles for which your organization stands, articulating those principles really clearly, and then ultimately hiring, firing, promoting, which families do you accept, which kids you kick out. I advise a lot of people on building communities, and I always say everybody wants to be warm and fuzzy, "Oh, community." Like, no. Who are you going to kick out? My very first thing is, who are you going to kick out? Because if you can align on who gets kicked out, then you can form a community.”
Predictions FTW
“The whole credibility of science is based on prediction.When you see Galileo introducing empiricism into science, and then Newton developing the Newtonian system, and then you get astronomers predicting new planets, oh my gosh, and chemists predicting new chemicals, oh my gosh, new elements. The history of science is astonishing prediction.Social sciences has mostly been free from predictive responsibilities. So some of this is, yes, let's hold, I would say, intellectuals and academics accountable for their predictions. Philip Tetlock, a marvelous human being, Tetlock has work on how experts don't predict the future any better than people who focus on predictions, and so domain experts have no special expertise. Often they just spout these opinions, I would say irresponsibly.”
Books & Articles Mentioned
The Habit of Thought: From Socratic Seminars to Socratic Practice; by Michael Strong
Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World's Problems; by Michael Strong and John Mackey
The Case Against Adolescence: Rediscovering the Adult in Every Teen; by Robert Epstein
The Status Game: On Human Life and How to Play It; by Will Storr
The New Inquisition: Irrational Rationalism and the Citadel of Science; by Robert Anton Wilson
Hierarchy in the Forest: The Evolution of Egalitarian Behavior; by Christopher Boehm
Collective Illusions: Conformity, Complicity, and the Science of Why We Make Bad Decisions; by Todd Rose
Can Gambling Save Science? Encouraging an Honest Consensus; by Robin Hanson
Skin in the Game: Hidden Asymmetries in Daily Life; by Nassim Nicholas Taleb
Hothouse Earth: An Inhabitant's Guide; by Bill McGuire
Think in Bets: Making Smarter Decisions When You Don't Have All the Facts; by Annie Duke
The Ultimate Resource; by Julian L. Simon
Keep Your Identity Small; by Paul Graham
Transcript
Jim O’Shaughnessy:
Well, hello everyone. It's Jim O'Shaughnessy with yet another Infinite Loops. Today's guest, Michael Strong, is one of the most impressive people I have had the privilege to chat with. You are one of the most experienced designers of innovative school programs in the United States. You've done things that many consider impossible. You've moved a group of minority female students four years ahead in critical thinking, in four months. Wow. You created an amazing Montessori secondary school in San Antonio, created the Winston Academy, where middle schoolers passed AP exams, making it the most advanced academic school in the country. And you co-founded the KoSchool in Austin, Texas, the original model for the Academy of Thought and Industry. And of course, where would you be without having written a couple of books. You've written... You are the author of The Habit of Thought: From Socratic Seminars to Socratic Practice, and you're the lead author on Be the Solution: How Entrepreneurs and Conscious Capitalists... I love that term, by the way. ... Can Solve All of the World's Problems. Michael, welcome.
Michael Strong:
Delighted to be here, Jim. Thanks you for such a wonderful introduction.
Jim O’Shaughnessy:
So, I became interested in you when I became aware of the Socratic experience. And I'm a huge fan of the early Greek philosophers. And I chuckled when I saw the name, because we all know what happened to Socrates for enlightening the youth of Athens.
But why don't we give our audience, who's watching and listening, a bit of your origin story. Again, you really do impress me. Your social mobility cred is pretty amazing. You were born to teenage parents. Your mom was a 16-year-old high school dropout, your dad was 18, and yet you got admitted to Harvard, Yale and Dartmouth on a self-directed program without any parental guidance. You've worked an amazing number of jobs that normally you don't associate with one another. You were a farm laborer, a logger, a dishwasher, a programmer, and now this. Tell us a bit about your background and what led you to this wonderful path in life.
Michael Strong:
Well, thank you. And of course, first I want to acknowledge, we're both Minnesotans. [foreign language 00:09:26].
Jim O’Shaughnessy:
[foreign language 00:09:27]. You bet. You betcha.
Michael Strong:
You betcha. And actually I'm very big on culture and the role of culture. So yeah, my father was actually raised on a farm near Finlayson, Minnesota. And I do think Scandinavian culture, Northern Minnesota hardworking farm culture was amazing. He was an elevator repairman in Denver, when at the age of 10, we moved back to a farm in Northern Minnesota, now near Lake Itasca.
I often say the best thing about my education was we had bad TV reception. Kids now, with 24/7 electronics, there we'd have this little rabbit ears on top of the TV, and we'd try to move it so we could get a little bit of image through all the fog, snow, fuzziness on the screen. But the fact is, I read. I read a lot. And so, long winter nights in Minnesota, I'd read 3, 4, 5 hours a night. By the time I was 10 years old, I was reading a 100-page book every night. And they say kids at Harvard don't read books anymore.
As an educator, I think they're reading. When I run into a kid who is a reader, I think 80% of their education is done. If you can get your kids to be voracious readers... Because even think about it, how are they going to study biology if they don't really read fluently? So, I would say reading was the biggest thing.
Just the other thing is I had a 90-minute bus ride to and from school up to Bagley, and then my friend and I would play chess, and we got to the point where the plastic chess pieces would fall off the board because we couldn't afford a magnetic chess board. That was fancy stuff in the '70s. So we started playing chess in our heads, and so he and I would play mental chess 90 minutes, twice a day, to and from school. And I actually think all that reading and all that mental chess probably did more for my cognitive abilities than school.
So, anyway, yeah, I had good test scores, and so I'd heard about St. John's College, great books college, Annapolis, Maryland, Santa Fe, New Mexico. I was going to drop out of high school and go there, but I had a college counselor and said, "No, go to Harvard. You can still study Plato, you can still study Greek, whatever." So I went to Harvard for a year. I hated being lectured at, and so I transferred to St. John's as a 19-year-old, and left Harvard behind. And to this day, St. John's is four years of all Socratic seminars, no lectures, classics of Western civilization. And going back to your love of the Greeks, St. John's Annapolis was the first college south of the Mason-Dixon line, integrated in the 1940s, and the first Black Johnny was asked, "Do they care about race at St. John's?" And he said, "No, they care more about if you're a Platonist or an Aristotelian than if you're Black or White." I think that's exactly right. That's the big question at St. John's. We have a few objectivists, a lot of Thomists and so forth, but Platonist or Aristotelian is the fundamental distinction.
So yeah, anyway, after St. John's I went to the University of Chicago, and there I was leading Socratic seminars in inner city public schools under Mortimer Adler's Paideia program. I'm sure you remember Adler. This was back in the '80s. I felt like it was liberating in prisoners. The kids were so alive, so excited to be thinking and talking about ideas. That led to full-time teacher training role in Alaska, training teachers to lead Socratic seminars, and then ultimately that led to creating private schools.
We were on soft money, ran out of grant funds, and some parents asked me to start a private school for their children, so I was sort of an accidental education entrepreneur. Had been doing classroom work, but that was the first time I had to deal with budgets, and payroll, and business plans, all of that stuff. And so, gradually I developed this niche of the intellectual high end of alternative education, jumping over a whole bunch of these projects you mentioned, to just before COVID, I'd created the Montessori high school model for the largest Montessori network in the US. And when COVID hit, I left to create the Socratic Experience, a virtual program, grades 3 through 12, 3 through 12 for entrepreneurial, intellectual and creative students. So, I can go a lot of directions, but that's a quick thing with a lot of leaps.
Jim O’Shaughnessy:
Yeah, very impressive indeed. When I was talking about looking forward to this chat with you, with a friend, I gave him your credentials, and he's like, "Well, sure, an auto-dictat who can get perfect scores on GRE exams, et cetera. That's a fairly unique individual. How does he propose to scale that type of Socratic experience in a manner that it's going to work for people who maybe might have motivational problems, might have parents who look at the traditional school system as if not great at educating their children, at least a consistent, predictable place that they know their children are hopefully being educated, but at least being taken care of?" Lots of people have two working parents, if they have two parents in the home, and so, one of the things that I find interesting is, how do you scale this?
Michael Strong:
Yeah, no, great question. And I'm going to back up to some universal issues, and I'll go back to my particular project. But I'm a big believer that high agency is the norm for humanity. Just going back to traditional cultures around the world, at puberty, there was a rite of passage, and the young man was supposed to go out and hunt his first deer at 12, 13, or whatever. And this was really pretty universal. In just the US tradition, people like Ben Franklin, Thomas Edison, Andrew Carnegie, John Muir, at the age of 13 or so, they were out working. And so it used to be the norm to take tremendous responsibility at 12 or 13. And I would say, for a lot of reasons, including compulsory mass education, we've systematically deprived young people of their agency.
One thing people don't know, is both the term teen and adolescent were invented in the early 20th century. We didn't even use to have concepts for these, because you were simply a young adult, going out and doing things. Actually, my favorite shocking anecdote is, the Abernathy brothers were two brothers, who in 1910 rode horseback alone, without adults, from Oklahoma to New York. So you imagine taking your 10-year-old son and saying, "Can you take your six-year-old brother on a horseback ride?" It's just beyond shocking. And big fan of Lenore Skenazy's, Free-Range Kids. This is beyond anything anybody thinks about, but it turns out their dad had been a cowboy, and what they hadn't realized, is cowboys in the late 19th centuries were boys, they were 12, 13-year-old boys who were out riding cattle. So, the expectations of maturity used to be so much higher. And even things like brain develop... Now there's, "Oh, your brain doesn't develop until later." Yes, and if you're taking on responsibility at a younger age, you're developing your responsibility at a younger age.
There's a book by a former editor of Psychology Today, called The Case Against Adolescence. And he makes the case that the whole concept of adolescence was a mistake. So they're pretty radical beliefs, but going back to your question of, "Can everybody do this?" Well, you're right, the establishment model is standard education. We're not going to get everybody from the establishment model, but there is a movement among early adopters to go for high agency education. And I'm not by any means the only one. I would say Montessori is high agency. If you've heard of Acton Academies, Acton Academies or National Network, International Network, hundreds of schools emphasizing entrepreneurship. Alpha Academy is kind of an Acton spinoff, run by Joe Lamont, a billionaire, tech billionaire, who believes kids need high agency. Prenda Network is another K-8 network, founded by entrepreneur, high agency. Acton is, by the way, founded by Jeff Sandefer, an entrepreneur.
So, there are quite a few, I would say entrepreneurs who realize agency is the most important thing for their kid. And when you have the elite... I'm in Austin. The tech elite in Austin are very much on these high agency tracks. I know four or five billionaires who have their own micro schools in their homes, because they want their kids to have a high agency education, instead of the standard prep school.
The case I would make to your friend is, A, historically, tremendous agency used to be the norm, and B, we are seeing early adopters, including, and perhaps especially the tech elite, not just the tech elite, Agile coders. I know Agile software trainers... Agile's all about get it done now in the way that it works. Agile's software developers in general in favor of this. So, as we see these early adopters going into programs like mine, like Acton, like Alpha and so forth, we'll follow the technology adoption cycle, and late adopters, that's down the road, but we're at the phase of crossing the chasm, and I'm very excited about that.
Jim O’Shaughnessy:
I find it very difficult to disagree with anything you just said, but then the question presents itself, what about... It sounds to me like the strategy is, let's focus on the tuned in, as Bucky Fuller would say, who realize all of these problems, and are taking action, as you just enumerated, to solve the problem. What about the idea that, "Okay, you're just going to literally entrench and recreate a different kind of elite, that has opportunities and experiences and educational opportunities available to them, that the vast majority of people in any country, and even a wealthy country like the United States, just have no access to?"
Michael Strong:
No, great question. So a couple of things. For one, I'm very excited about educational scholarship accounts, ESAs. Arizona piloted this, I believe two years ago now, where they gave all 1.1 million students in Arizona access to an ESA that could be used to go to any school. We've got about 10, 12 students at the Socratic Experience using Arizona ESAs to attend our program at all income levels. There are estimates that the next year or two, 20 million students will have access to ESAs. I think some 14 states have passed them. When Texas goes, as it almost surely will, that'll be 25 million. And this is not including charter schools. Charter schools are still part of the dominant paradigm. I love charter schools. But the point is, a very large number of parents are getting access to these.
And obviously there are plenty of high income African Americans, but on the issue of say perhaps low income African-Americans, homeschooling has gone up about 5X among the African-American community. And I know a lot of low income African-Americans who are disgusted with what's going on in their local public schools. Sometimes it's a disciplinary disaster, and they take their kids out. Very often... And I know a number of moms like this, moms of Black boys, who say, "Oh my gosh, my wonderful, sweet child is being... He's very energetic and active, and he's getting in trouble. I don't want him to get into middle school and be disciplined and so forth, so I'm pulling him out, homeschooling."
So this is a broad movement across socioeconomic demographics, across racial demographics, all kinds of things. And there are a wide range of materials for all sorts of people to educate. Going in a different direction, my wife was from Africa. She's from Senegal. She and I have a school in Senegal for low income kids, doing exactly the same thing I'm doing in the Socratic Experience.
So, this is, although it's being led... And this is technology. As you know, cell phones are usually... '80s and '90s cell phones with these big monsters that only rich people could afford, now the poor herder in Africa has a cell phone. And so, the whole point about technology adoption is we start with the elites, and then we get lower cost, higher quality, more diverse niches, and ultimately we create high quality, low cost goods, in this case education, for everyone. So yeah, we're starting there because that's where we can charge the most and get started, but this is all about global access to low cost.
Just to talk about agency a little bit. Right now, because of online resources, you can have access to a great, free online education, anywhere on earth, right now. You can take Harvard CS50, Harvard's introduction to computer science, for free around the world. If you pay $60, you get a certificate from Harvard, $300, you get a fancy certificate. But the point is, MIT opened a course where you can get an MIT degree for free, basically, online, right now. Why is not the global poor doing this? Well, it takes a lot of, I would say agency to get there. So, if we help young people around the world learn how to become autodidacts, and I know that we can train people to be autodidacts, then they have access to everything for free, right now. So I'll quit ranting, but that's my rant.
Jim O’Shaughnessy:
That's not a rant at all. And you're anticipating my next question, because one of our criteria at O'Shaughnessy Ventures is high agency, and we have a bunch of different ways to test for it. But how do you deal with the unmotivated? How do you take somebody who just, no matter what you try, doesn't become highly agentic? Is there a process that you follow? Talk to me about that.
Michael Strong:
Yeah, no, this is huge. And first of all, I think most children are a high agency. Again, go back to Peter Gray, who's a big advocate of unschooling, self-directed learning. I'm a big fan of Peter's. Peter's done research on children in indigenous communities. And if you look at people in the rainforest and traditional tribes in the Amazon, the three, four, five, six-year- old boys are out hunting and playing and everything. Hunting and playing are basically the same. They pretend hunting. They probably don't catch a lot, but they're out there doing it. Often the girls are either pretend or actually helping to prepare meals and everything. Those children naturally take on roles, they're naturally agentic, and then the question is, if we see in nature, so to speak, the natural human condition is to be agentic, then the question becomes, "Okay, what have we done to damage their agency?" I'm a big fan of John Taylor Gatto. Gatto was named New York State Teacher of the Year, and in his acceptance around 1990, in his acceptance speech, he said he quit because he believes traditional schooling is actively damaging agency. And I think there's a lot of truth to that. I think that mainstream schooling often trains kids to be passive and dependent, sit in your seat, do as you're told. We're now aware about with respect to boys in particular, sit in your seat and do as you're told is not a recipe for success for boys, in particular with ADHD and medication and all of this sort of thing happening.
So I'm very interested, for instance in Montessori, if you go into a Montessori primary classroom, you see three, four, five-year-olds moving about the room independently, being agents. I think every person who's interested in education should go watch a well-functioning Montessori classroom for five minutes. We're naturally agentic. And then I'm very interested in extending that, and this is why I see Montessori, Acton Academy, Prenda, all these models as supporting agency straight through, because they think, really, if you get kids to be in middle school and they're used to agency, then it's never a problem. The problem that you're talking about, and I have worked with kids like that, is when they've been trained to be passive independent in school, and then they also, say, become addicted to electronics, and whether it's gaming addiction, social media addiction, or whatever it is, I do see kids whose agency has mostly been destroyed because they're not age agentic at school, they're not agentic at home. Obviously, homes where you can go to regular school, and if your home is very high agency, no problem, school's not an issue, but if you don't have a supportive environment for agency, either at school or at home, and you are prone to these or addicted to electronics, and I'm very serious about addicted to electronics. Jonathan Haidt has been great about that, then you've got an issue.
And so, part of it is there's a de- schooling process. A lot of times, boys addicted to video games is huge. A lot of times, if I get a boy who's addicted to video games, let's say 12 or 13, I can shift them around. I can still maybe do it at 17 or 18, but it becomes harder, and I'm sure you've read this literature. Now we've got this problem of young men who are spending all their time on video games, not working, and maybe smoking pot or whatever, so we do have a crisis of agency. I see it as this double whammy of traditional education has become ever more bureaucratic, rigid, and less flexible. Now, you and I are old enough that I think public school used to be more agentic back in the seventies and eighties, but for a variety of reasons, it's become more bureaucratic. At the same time, the electronic addiction, I barely had a TV, and now 24/7, you can kind of inject dry balls with all sorts of things, and as a consequence, we have a crisis of agency, especially among teens and early twenties.
Jim O’Shaughnessy:
Yeah. I was lucky. I think, as you know, I was lucky enough to be in the first Montessori class in Minnesota, and I badly cut my hand when I was at Montessori, and my mom told the story. I don't actually remember it myself, so these are my mother's memories, but she used to say, when I went there, that she'd wrapped my hand in was turning red because of all the blood. The nurse was trying to distract me and said, "Well, Jim, do you go to school?"
I said, "Yes, I go to Montessori school."
She goes, "Oh. What are you learning there?"
Now, remember this is 1965 maybe or 1966, and I said, "well, we're learning about xylem and phloem, and the way plants grow," and the nurse apparently turned to my mom and said, "Is this kid pulling my leg?
Michael Strong:
Fantastic.
Jim O’Shaughnessy:
I was very lucky to go to Montessori, to grow up in a household that was filled with books, and all of those things that do lead to inquiry do lead to a broader education, et cetera, but how do we take what is a massive problem, at least here in the west, where that is no longer the case, where kids are not growing up in households that are filled with books but are indeed filled with screens that are being sent to a bureaucratic system that was essentially designed by early industrialists, at least in this country, who wanted kids to be trained to sit quietly in a room, do as they were told, because what do you need to do as a factory worker, right?
You need to be able to be there for your eight or ten hour shift, do what you are told. In essence, in my opinion, and obviously this is a slightly strong opinion, those early classrooms morphed into something that essentially created robots and really de-emphasize everything we're talking about. That's the situation that we find ourselves in today, and I'm all for slaying dragons and for the Don Quixote quest, but how do we get in and change that?
Michael Strong:
So, again, it's a big problem, no doubt about it, and this is a definitely a Don Quixote quest, but we're winning. We have the early adopters. First, I want to do one more framing about ways in which things have changed. I think it has been a boiling-the-frogs situation over the long haul, and especially places like Minnesota, Iowa, there's incredible loyalty to the public schools, and I certainly, I grew up with that belief in the public schools, but one thing that happened between, say, 1920, and 1970 is we went from more than 200,000 school districts to fewer than 20,000 school districts. That is the mid-20th centuries of age of school consolidation. One of the things that did was back in the 1920s, many one-room schoolhouses were incredibly flexible. I'm forgetting which of the great early entrepreneurs it was, but one of those entrepreneurs, I read an account of him in the early 20th century, where he didn't go to school until he was 17, went to the local public high school, test it out in a year, and got his diploma. Basically, zero bureaucracy.
You'd go, you pass the test, you're done. Now, I work with all sorts of very bright kids, who are not allowed to go one grade ahead in mathematics in a public school, so I think the original intention was American public education was great. Sadly, it's become so bureaucratic. This is why I'm all about creative destruction. The ESA is charter schools, early enrollment in college. Let's let a homeschooling unschooling. Let's let 1000 options bloom, and the new ones will get there, so that's point one. Point two is, one of the things I'm really trying to get people to focus on is it is more about culture, subculture, and so forth, rather than educational program and policy, which sounds odd, because all of the policy debates are this curriculum, that assessment, and so forth, but I'll give you a data point. Utah has the highest rates of social mobility in the US, despite the lowest per pupil spending in the US. Basically, Utah social mobility is about the same as Denmark, which is considered sort of an ideal of social mobility. What is it? It's Mormon culture.
Now, I'm not Mormon, but I have huge respect. I see the Mormons having designed a brilliant technology of agency and self empowerment. They have, for instance, these accountability groups, where young people interact with each other and it's within the framework of the LDS church, but there's no reason we couldn't create secular counterparts. I would say I work to create secular counterparts. A lot of it is we do need other people to help us be accountable. And the message I want to get to any family that's interested in social mobility, I was raised very poor. Sometimes we didn't have enough to eat. I grew up on Goodwill clothes. I grew up very poor, but you don't need money to have social mobility. You really don't, and so all these debates about egalitarian spending and so forth, okay, nice to spend more, but that's not the thing. If we could replicate Utah levels of social mobility at, to give you a sense, I think Utah's around maybe 5,000, 6,000 per year spending, per capita spending. New Yorkers around 40,000, and New York has terrible results.
So it really is about how to create agency. Going back to these African-American moms who are pulling their kids out, they're all about creating a healthier subculture, healthier agency, get their kids focused on what's good. A lot of them are Christian. I am a secular person, but I have huge respect for religious communities to create a sense of personal responsibility and agency. Quick rough on that one. There's a considerable evidence that religious African-Americans do better in college than non-religious ones. Again, it's interesting to me, as a secular person, and I think part of it is traditional Christianity is certainly about personal responsibility. These old-fashioned, 19th century notions, it used to be ubiquitous, for a wide variety of reasons, are less common, but this is more important than spending. The bottom line is, if you want your kids to succeed, and even the kids, I coach teenagers, self mastery, if you want to be a happy person, self mastery. I will do one more rant and let you ask another question.
I have a lot of teenage boys come in, addicted to video games. I ask them, "Okay. Do you want to be playing video games in your mom's basement when you're 30?"
"No."
"25?"
"No."
"20?"
"No."
"18?"
"No?"
"Okay. Let's get at it today. Well, let's just get over this right now. You don't want to be playing video games in your mom's basement, just out of self-respect." They know it's not the right thing.
Jim O’Shaughnessy:
And you refer to these communities as kind of virtue cultures. What specific steps can a new school or micro school founder take to intentionally build and sustain that virtue culture without it, itself, sliding into orthodoxy? Because later in our conversation I'm going to ask you about that. There are a lot of incredible communities. A lot of this has been tried before, and they slid into orthodoxy, into charismatic leaders, et cetera. I don't know if you've read Will Storr's The Status Game, but with all these various status games, many of which do not have anything to do with money, but have to do with other things, like remaining Orthodox to, the joke that I would make is the open-minded society enforcing the beliefs that you are meant to have or you're not open-minded. How can those founders build those virtue cultures without that happening?
Michael Strong:
Great question, and I'll dig into that in a minute, but again, a first bit of framing. I think one of the things is we do need to have lots of experiments, many of which will fail, some of which are crazy. Going back to 19th century US, it was a hotbed of religious experimentation. Frankly, I think the early Mormon church is really crazy, really crazy, and so how do we understand that, the fact that maybe one of the best social technologies for social mobility started out as this incredibly insane thing? It's not the only one. If you look at 19th century American religious movement, early 20th century, America has been a hotbed of, frankly, strange, strange people in beliefs, and yet we're way more vibrant than Europe, and I would say the fact that we're way more vibrant than Europe is directly connected to the fact that we make room for crazy.
A very different sort of case, I've been extremely interested in the vibrancy of San Francisco, maybe not recently, but 60s, 70s, 80s, 90s, early aughts, San Francisco was the place. I think that's directly connected to the fact that there was a lot of crazy in San Francisco. In that case, one of the things was the sex and drugs, the gay rights movement, hippies, and all of that. Steve Jobs, in some ways, was influenced by that, and so this sort of openness to all kinds of things, I think, is a necessary precondition to have a few sane ones, and lots of failure is also the norm, and so we have to be ready for lots of failure. So, with that in mind, yeah, I encourage people at the micro, at the school level, to be very focused on their core principles and virtues. What do they believe in? What do they stand for? I would say alignment among school founders is the most important thing. I've worked with a lot of new schools where they thought they were aligned.
In the year two, year three, they weren't, and the whole thing fell apart, their schisms and so forth. Education is just as prone to schisms as is religion. Everybody has the orthodoxy, and the other side is evil and so forth, but I think alignment is really important, and ultimately, going back to your background as an entrepreneur, you need to be able to make hiring, firing, and promotion decisions based on your united principles. I think one of the reasons the mainstream educational establishment prevents virtue cultures is, in a bureaucratic establishment, hiring, firing promotion is based on credentials, and I don't think credentials in education are aligned with educational excellence, and certainly not aligned to the particular virtue. I'll give you a very concrete example. At one point I was advising, I was on the board of an alternative school in Austin, and there was this award-winning teacher. She'd literally won national awards as a science teacher, but the school was very committed to not being emotionally reactive.
This award-winning science teacher would snap at kids, and she'd get angry and attack them, and they said, "Well, you got to fire her," and the founder ultimately did, but it's like, "But she's an award-winning science teacher." It's like, hey, if she's not part of the culture you want to create, she has to go, and so I think it comes down to, as an entrepreneur, as a leader, being able to make decisions based on the principles for which your organization stands, articulating those principles really clearly, and then ultimately hiring, firing, promoting, which families do you accept, which kids you kick out. I advise a lot of people on building communities, and I always say everybody wants to be warm and fuzzy, "Oh, community." Like, no. Who are you going to kick out? My very first thing is, who are you going to kick out? Because if you can align on who gets kicked out, then you can form a community.
Jim O’Shaughnessy:
I love that view. I also love the idea of lots of experiments, many of which will fail. I hold that view very strongly, and yet the resistance to that view that I have gotten from colleagues, from friends, from people that I've done volunteer work with, et cetera, has always sort of stumped me. To me, that's the only way you make progress. You go forward. It's the way we managed money when I was still in asset management. It's like we did very elaborate back tests of particular, empirically-derived strategies.
One guy looked at me, and he goes, "Well, yeah, so you're saying this is perfect?"
I'm saying, "Absolutely not. Look at what I have in front of you. I am showing you the ten worst down drafts or draw-downs in this strategy. What other asset manager comes in here and shows you the ten times that it failed horribly and then went on to do well?"
He went, "Well, none."
I said, "Yes."
Acceptance of failure is part of the deal. It is always part of it. It's the only way, in my opinion, that progress can happen at all, right? Because lots of ideas, you've got to test them, and most of them aren't going to work, but then again, I come back to the original question of, you used San Francisco as an example. Now, San Francisco today is, unfortunately, an example of the very opposite of what it became well known for, right? It is incredibly drenched in orthodoxy and in political ideology, and the results have not been good. How do you stop that? I will stipulate that I accept your example of you've got to be able to know who to fire, who to get rid of, but taking that as a given, how else? Garry Tan is doing a lot of work on trying to get some sanity back into governance in San Francisco, but man, that's a bit of a Sisyphean challenge, right?
Michael Strong:
Well, for sure. For sure. And so, first, I want to acknowledge that all things grow, mature, and die, and I'd hate to think that San Francisco is dying. I would love to see it revived. Of course, in Austin, I have a little bit of Austin chauvinism, where we get all of these people from the Bay Area coming to Austin. I do have a little bit of schadenfreude. Aha. So, that said, I'd love to see San Francisco revived, but I think some of this goes to, we need principled advocate of what I would call classical liberal frameworks, some very Hayekian, very Popperian. This whole principle of the reason for freedom is not for selfishness, not for greed, or not for any of that. I think anybody who sees that we need lots of experimentation, you need to minimize barriers to entry.
As you know, just in terms of housing, San Francisco has some of the most horrible barriers to building new housing of any place in the US. Houston, by contrast, has some of the fewest barriers. Where is it more affordable to live? Houston. Where is there less homelessness? Houston? So, I do think people are starting to become rational about this, and they realize that San Francisco has had some bad policies. There's a YIMBY movement that was actually born in San Francisco. Yes, in my backyard. You would know better than I, but commercial real estate values have just collapsed in San Francisco, so there must be billions of dollars at stake due to these bad policies. So we just need to have an environment in which we can talk freely about all of these things, and the importance of experimentation and these ecosystems of experimentation.
Then, I would say a nonpartisan way to think about, "Okay. How do we have lots of experimentation and then systems that identify, not just the winners, but the things that will lead to a better world for all?" I'm very much a do-gooder in that sense. I want a better world for all. In order to have a better world for all, we need to have a very open system with minimum barriers to entry, lots of experimentation. Then whether it's for-profit, non-profit, if government can do it right. I'm okay with government. I think it's harder for government to do it right, but whatever it takes, we need to support the promising new little seedlings, so they grow up into big, flourishing trees, and let the stuff that's not working, die. We just can't subsidize the bad stuff. We can't let people who are aggressively or eager to shut down debate, shut down debates about how we create flourishing. We need to have this open experimental system and advocates for that system. So, that's a little rant. I imagine you mostly agree with that.
Jim O’Shaughnessy:
I do, and yet the challenge that I always find, I've often used the analogy of a gardener, right? If a gardener doesn't weed his or her garden, guess what? It destroys the garden, and it's overrun with weeds. I looked historically at things, so for example, I don't know if you're familiar with Robert Anton Wilson, but I'm a big fan of his. He was, I think, many, many years ahead of his time. I was rereading his book, the New Inquisition, Irrational Rationalism and the Citadel of Science.
It really struck me. Within the scientific community, the citadel of rationality, in its former glory, suddenly became intolerant of people like Rupert Sheldrake. It became intolerant of any question. In fact, it morphed into an ideologically held, captured thing. It morphed from the scientific method to scientism trademark. Trust the science, trademark. And that really killed me, because I'm a huge fan of the empirical, scientific method. It's gotten us so far in civilization, and yet it is now being used almost as a weapon to tell people, "You can't think that. The science is settled." Anytime I hear, "The blank is settled," I know that I'm dealing with an ideologue, and not somebody who truly is a supporter of inquiry. What do you think?
Michael Strong:
Well, of course, for me, personally, in terms of virtue cultures, I would say the three most important heroes for me are Socrates, Galileo and John Stuart Mill. Freedom of speech, freedom of thought. Yes, Socrates was put to death for getting people to think. Galileo, of course, famously, and then John Stuart Mill, we have an obligation, both to hear and understand the positions that are opposed to us, so this is where I do blame academia. I was appalled when I was in graduate school in the 1980s. I was first exposed to Herbert Marcuse, and Marcuse actually said, "We should. We intellectuals, we thinkers, we academics should repress opinions that we disagree with," and I was horrified. That's like the most sacrilegious thing an intellectual could say to me, and so, insofar as academia has been infected with this Marcusean ethos, it's a catastrophe. I don't mean to exaggerate. For all the reasons you articulate, if we're not open to new understandings, we are going to undermine.
Actually, a very personal one, aside to where I didn't mention in my development, is I went to graduate school at the University of Chicago to prove the Chicago economist wrong. As a young person, I knew that socialism was right, pre-market capitalism was wrong. I was going to go into the belly of the beast and figure out what they got wrong. I learned I didn't understand economics. I ended up working with Gary Becker, who later won a Nobel Prize on ideas and culture as human capital, and I realized that had I not been exposed to these ideas, I would've simply believed that free market capitalism was bad. Now, of course, a very sophisticated issue, but on balance, it creates prosperity for all. Done right, a lot of work to be done and done right, but done right, prosperity for all. Who doesn't want prosperity for everyone? My wife's from Africa. A billion Africans are super poor. They need free market capitalism there. A whole other story about why they have it, but we need urgently to get people to understand that we need an open system of dialogue and debate.
I'm a big fan of Elon Musk's X, University of Austin, and Barry Weiss's Free Press. I see all of those as pushing back against this elite that had shut down debate. For me, one of Elon Musk's biggest victories was when Mark Zuckerberg, was it last week or whenever, stopped a censorship on Facebook. I think Facebook used to be the soft CCP. The CCP controls all speech. I'm not a terribly provocative person, but I post very mild articles. My Facebook engagement used to be 10, 20 times what it was, but I posted a couple of things, questioning something, and boom, totally shut down, shadow-banned, all of that. Some of these things, we could pick our favorite issues, but I think there are lots of issues where, clearly, there was some truth that was shut down by these moralizing authorities that believed it was disinformation. So we won't rant anymore, but again, you probably agree with a lot of that.
Jim O’Shaughnessy:
Yeah, and yet it's just this sort of repetitive nature of seeing this phenomena happen. I am usually an incredibly optimistic person about most things, and I always look for things to root for as opposed to against, but sort of the new McCarthyism, and so for people who aren't familiar with that term, in the 1950s, there was a senator named Joe McCarthy. He decided that the State Department, and a variety of other institutions in America's political structure, were hotbeds of communist spies and activities, and literally created, out of thin air it turns out, a witch hunt where he essentially made anyone in the arts, Hollywood was the primary focus, ultimately, right? But it started in government, but then it spread throughout society, and he went after Hollywood, and basically, you got blacklisted if you had even a hint of thinking differently than was prescribed by good old Senator McCarthy. And now we see almost an exact repetition of this, but this time from the left. He was on the right, right? So, equal time here. I just think that when we politicize anything, we make it an us-versus-them. We encourage tribalism, we de-emphasize true dialogue, true conversation.
Your point about capitalism, Howard Bloom has a great book about reinventing capitalism because he's looking at all of its weak spots. But one of his lead paragraphs is, "For centuries upon century religious movements primarily," but then certain types, state systems, which really communism is just a different kind of religion with a different God, and one might say capitalism is also a different kind of religion, but he makes the point, he says, "Islam, Christianity," you name it, he just goes through all the religions, "they promise they would bring you to the promised land, and what brought you there? Free market capitalism, the rule of law, freedom to express your opinion and speech."
Why is it so difficult when we look at all of history and we put all of the communists... Again, back to experiments, right? You and I are both in favor experimentation. There was a lot of experimentation with socialism, fascism, communism, all of those things. You do not need to be highly intelligent to look at the death tolls and the lack of the ability to produce anything that the people in that society actually want it to have, and yet, and yet it continues to be in different forms, in different guises, the same ideology being propounded.
One of my ideas is that a lot of these things are for the adherence, not so much for the leaders of these movements, but for the adherence, these are emotionally held beliefs. And I wonder... Because the Socratic method and logic and all of that is pretty much the opposite of an emotionally held belief, but how do you change an emotionally held belief, not using emotional arguments, but using logical ones?
Michael Strong:
No, really great question. First of all, of course you have to be exposed to the arguments and you have to be free to make all the arguments, to kind of go back to the previous thing. But Hayek talked about the desire for socialism as atavistic, kind of a throwback to primitive culture. And there's a book called Hierarchy in the Forest that goes and looks at Indigenous tribes, but there's a lot of traditional peoples that are very hostile to people that are too selfish, who for instance, if you kill the elephant and you keep most of the elephant meat to yourself, the whole community will get on your case, "No, you got to share the elephant meat." And that makes sense. You're a tribe of 150; we got to share the meat. And so we've got that baked into our biology, and it is sort of unnatural to go from our traditional, Dunbar number 150-scale moral impulses to a high occult of the extended order of rule of law and so forth.
So one of the key elements, and I'm glad you mentioned the rule of law, so I still have a lot of arguments with people on the left, and the left case against capitalism is greed is bad, selfishness is bad, therefore inequality is bad and so forth, and they're kind of, "Got to share the elephant," sort of thing. And I understand where that moral impulse comes from, and again, I'm a do-gooder. I want to see a billion Africans become prosperous. But what they don't understand is prosperity only comes about through secure and transferable property rights, rule of law, and minimal regulation.
And just on that point, Africa is the most regulated region in the world, and people don't realize that. And one of my frustrations with academia shutting down debate is there is an economic literature on the excessive regulation of Africa and other poor countries in general, excessive economic freedom and prosperity correlated. But the leftist academics don't welcome that debate. The million in me, if somebody says something I disagree with, "Wow, what's the truth in their side? I want to go seek and see what's true in their perspective. I have an obligation to see what's true in their perspective." And talking about the Marcuse thing, if my impulse is, "I got to shut down what disagrees with my perspective," that destroys the process for discovering the truth right there.
So on the one hand, we need, on the Socratic thing, to look for consistent, coherent understandings of reality; when and where might capitalism lead to prosperity? When and where might it lead to terrible outcomes? And again, externalities, there are serious issues about externalities if they're not internalized. So how exactly to structure capitalism so it is consistently a win is a, I think, fascinating, important topic. I did the whole Conscious Capitalist thing with John Mackey because we're looking to create a better capitalism. So I mostly agree with many of the critiques, but if the people who are critiquing it don't understand the positive side, and in particular the structure that leads to the positive side, then they'll never help Africans become prosperous.
My take... And my wife is really angry. You can have her on our show. She'll really rant... is that the left has given up on Africa. It used to be the left cared about Africa. I don't know. When's the last time you saw them even pay attention to Africa anymore? Billion Black people poor forever. Oh, well. Climate change. And I try not to be facetious, but there's a little bit of frustration when you've got people literally dying, enslaved, and so forth. It's horrible. So end of that rant.
Jim O’Shaughnessy:
I too am a huge fan of Africa and Africans. I've been several times, and it was literally a transformational experience for me. From the investment side, we are partnered with a pre-seed, seed-type investment company with boots on the ground, Pan-Africa, and we believe that the potential there is basically limitless because, as you say, the introduction of smartphones, the introduction of technology I've seen in my travels there and in my dialogues with people who are African is truly liberating the entrepreneurial spirit in Africa. We've seen a huge uptick in applications from the continent for our fellowship and grantee program. So we definitely think that there are lots of green shoots there.
But the other thing that I would emphasize is another great example of where over-regulation really serves as a carburetor that limits very, very little growth would be India. India should, in my opinion, it should be the next colossus. They have an amazing population, many of whom are incredibly well-educated. And it does get back to the whole idea... To me, the outcomes here are just so crystal-clear and so... I think the truth ought to be predictive. And when you look at outcomes, it's very, very difficult, and now let me add the parenth, despite all of the problems, and there are significant problems with our type of society, our way of running things.
So, yes, stipulated, they exist, and when we get rid of the current ones, guess what? New ones are going to pop up, and let's just hope they're new and better problems. But this idea that you take a black-and-white deterministic view, if you just were looking at outcomes, people are... And also look at where people voting with their feet. I think the quip about which society is better, well, a society that has to build a wall to keep their citizens in is probably not a great society, whereas a society that wants to build a wall to keep people out because so many people want in, you might want to look into what kind of things they're doing there. And yet, and yet, how is it 2025 and North Korea still exists?
Michael Strong:
Yeah. So I'm going to give you bunch of things. This is where all the biases accumulate. But just at the level of, going back to academia, I know two Nobel laureates are more free-market than they let on because of the social vibe in academia. And they're both dead at this point, but one, it was said of him by somebody who knew him well, he pretended to be less free-market than he was because he wanted to be invited to the cocktail parties. That is, the social stigma against advocating for free market capitalism is extreme. And I was at University of Chicago where within econ, it was totally okay to be free market capitalist, but outside of the econ department, there was a tremendous hostility towards free market capitalism socially. The other Nobel laureate said, when asked why wasn't more openly free-market, he said, "You catch more bees with honey than you do with vinegar," and just is kind of trying to rhetorically rope them in.
But the impact of that is, going back to India, if people... And I'm a big fan of Timur Kuran. Timur Kuran is the economist, Turkish economist, who talks about preference falsification, where if there are incentives not to be honest, of course people won't, and as a consequence, information doesn't communicate. So to take this back to India, Noah Smith is a center-left, generally pro-market economist. He writes a blog. In general, I respect him. But he wants to be liked by the left, and so I think he doesn't expose himself and typically dismisses a lot of free market economics. He did a piece on India last year, I believe, about why India isn't growing faster. One of the things that I've been tracking in India is once you reach a hundred employees, then all sorts of regulations kick in. So you look at why has China had such great manufacturing and explosion in manufacturing? China's now the world's leader in manufacturing. India, IT, but very little manufacturing. Hello, most manufacturing, you need more than a hundred employees. And if basically the state controls your business at a hundred employees, nobody's going to do scalable, or very little, relatively little scalable manufacturing in India.
So Noah Smith, super smart guy, had a long list of legitimate reasons why India had not yet grown as fast to China, but still promising, just like you said. But he never recognized this hundred-employee rule. And again, I see that as just part of this social stigma, and it's hard to know if he hadn't heard about it. If he hadn't heard about it, that's because other people don't spread... Things transmit to our society because it's okay or legitimate or acceptable or even celebrated to talk about them. So if there's a message... Very interested in how communication flows. A message that's believed to be moral high ground goes around the world instantly. If it's believed you're evil if you talk about this, even if you tell it to somebody else, they won't tell it to the next person. So I'm very interested in how not only formal censorship, but also social stigma prevents the communication of important things.
And as a highly relevant aside, I would say my wife and I and John Mackey, in terms of conscious capitalism, prosperity for Africans, we're focused on how do we get the intellectual and moral high ground for entrepreneurial capitalism? Because until and unless we have the moral high ground, leftist, anti- capitalist beliefs that are entirely ineffective will continue to predominate among intellectuals and on campus.
Jim O’Shaughnessy:
Yeah. And that hearkens back to the book I recommended to you by Will Storr, The Status Game. He makes a very compelling argument for what you just outlined, that people are not making decisions based on rationality, for the most part. They are making them under a much more complex social web, which makes total sense to me, and that the enforcers, if you will, of morality, of what is allowed into the Overton window, all of that, that's where you need to look very closely because that's where you're getting... That answers my question, why does North Korea still exist? Because they have a Draconian system where you either toe the line or you die. And that is a high bar to try to introduce any kind of change.
And also the idea of private knowledge versus public knowledge, right? Todd Rose wrote a great book called Collective Illusions, in which he talks about this almost invisible, and unintentional, by the way... Society has this way of creating norms and establishing norms that is often a very circuitous route... It isn't, "This is our objective and this is what we're going to do to reach our objective." It's just de novo from society springing upwards. And what happens is people become frightened to state their true beliefs because they...
But what Todd did in Collective Illusions, which I thought was so insightful, is he said, "This fear just develops from within the person. It isn't really something that they should be afraid of." And he gives all sorts of great examples, like when your average American is asked, "What are your goals in life," many of the answers are what you might expect; I want to be rich, I want to be famous, I want to be this. And then when you ask the question differently and you ask, "Well, what do you think your neighbor views as success in life," they state their own views about what will be success in life, and they're vastly different; I want a happy family. I want to take care of my family. I want all of these goods that would never show up on the list, which gets us to your interest in and my interest in predictive markets. If you have a predictive market where people actually bet, so they're putting money on the line, they tend to ignore all of the stated preferences that they have publicly and reveal their preferences through the betting mechanism of predictive markets. How do you think they fit in to your goals?
Michael Strong:
Oh, fantastic. And thank you. Before I go to that transition, I do want to say I've mentioned John Mackey, my wife, myself, in terms of positive capitalism. You and OSV Ventures, you're doing also a really great job of this positive thing. Just one of the other challenges is often people no longer believe the left and they go right, and there are ugly, I would say, racist, nasty things on the right, and so I think it's really important to have this positive vision that's not partisan either side. So as I've seen you developing your brand, OSV's brand, hurrah, [inaudible 01:09:00]. We need as many people in this positive, solutions-oriented space as possible, so thank you.
Jim O’Shaughnessy:
Well, thank you.
Michael Strong:
Prediction markets and reputational betting goes back to Julian Simon and Paul Ehrlich in the 1980s. Simon, an economist, bet Paul Ehrlich that these basket of tin metals would go... Simon said they'd go down in price, Ehrlich, up in price, running out of natural resources, all of that. And of course, Simon won. That eventually led Robin Hanson, among others, to go into prediction markets where what really matters is can you predict the future accurately?
Robin Hanson has a wonderful essay, I think 1990, Can Gambling Save Science? Deliberately provocative, as Robin Hanson likes to be. But even then, he recognized a lot of peer review amounts to crony, old boys' networks. The editors pick the favorite people. If they want to get a paper trashed and not published, they send it to the referees that'll kill it. If they want one that's politically sympathetic to get in the publication, they send it to the friendly referees. A lot of games like this. So peer review is an inadequate system of truth-seeking.
Whereas the whole credibility of science is based on prediction. Having a great book science education... When you see Galileo introducing empiricism into science, and then Newton developing the Newtonian system, and then you get astronomers predicting new planets, oh my gosh, and chemists predicting new chemicals, oh my gosh, new elements. The history of science is astonishing prediction. And now when they're doing gravitational waves, it's out to, I don't know, how many decimals. Just a ridiculous number of decimal points in terms of prediction. So the entire reputation of science and why it's deservedly so credible, it's because of prediction.
Social sciences has mostly been free from predictive responsibilities. I will give a shout-out to the Chicago Economics. One of the things Chicago Economics did is thousands of pages on basically the law of supply and demand. When things go up in price, typically less is demanded and vice-versa. It's 101. Frank Knight, an early Chicago economist, says, "That's proving water goes downhill." Well, for all the reasons you've mentioned, apparently we had to prove that water goes downhill, and people still will... People are surprised that congestion pricing works in New York City. Hello, economists have said congestion pricing will work for decades. So some of this is, yes, let's hold, I would say, intellectuals and academics accountable for their predictions. Philip Tetlock, a marvelous human being, Tetlock has work on how experts don't predict the future any better than people who focus on predictions, and so domain experts have no special expertise. Often they just spout these opinions, I would say irresponsibly. Philip Tetlock has a forecasting market called the Good Judgment Project where... And I love that branding, Good Judgment. Let's see if super forecasters can be identified, super forecasters who are those who disproportionately make correct predictions. And of course, nobody's right all the time. The whole thing about predictions... As an investor, you know this; even the best investor can, "Whoops, missed that one," and maybe lose a whole lot of money, but on balance. It's a matter of, what's your batting average over time?
And the whole thing with super forecasters is they're individuals who have a better batting average over time. Some of what they do is they listen to other perspectives, going back to million principles 101. If you really want to predict the future, this whole kind of protective identity, if you want to protect your beliefs, sooner or later you're going to fail in a prediction of the future. Especially in a complex situation, we absolutely need to be exposed. I'm sure as an investor, you wanted to hear information that disconfirmed your views, because if you didn't, you're going to lose money. That's the whole thing with prediction markets. You have an incentive to crave the most powerful contradictory information. Whereas in academia, a lot of people just want to get promoted up the ladder. I have a friend who's a Dartmouth professor who said that he used to think academia was about pursuing the truth. No, it's about you have an inbox, you have an outbox, and you do as much as you can in the outbox so you get promotions, so you get first to tenure-track hiring, and then tenured, and then promotions. But he said for most of them, it's just a job.
Quick aside, coming out of St. John's, I had a romantic platonic view of education: the true, the good, and the beautiful. I remember I was on a plane ride with an education professor just out of St. John's, and he was going to Las Vegas to gamble, and for me, it was sacrilegious. An education professor gambles? Oh my gosh. But I was just clueless. They're just ordinary people, inbox, outbox, getting their tenure. No interest in the truth. Whereas, yeah, prediction markets, reputational bets, wow. My reputation's on the line, my money's on the line. Now I have an incentive to pay attention to that, which will most likely lead to an outcome, predictable outcome.
Jim O’Shaughnessy:
Yeah. It's one of the reasons why all but one of the companies I founded was my name, because when I was trying to think of what to name my first company, which ultimately became O'Shaughnessy Capital Management, I was chatting with my wife and I gave her all these... This was in the '80s, so I gave her kind of what sounded like futuristic names and all these things. And she just looked at me and she goes, "How much do you believe in this," and I went, "Well, I believe in it entirely. I wouldn't start a company if I didn't believe in it." Then she said, "Then put your name on it."
And as I thought about it, I thought all of the old financial now-behemoths, but they were people's names, J.P Morgan, Merrill Lynch, Pierce, Fenner & Smith, and Morgan Stanley. Just the list is endless. When you put your name on it, you took huge reputational risk, which led to oftentimes spending much greater care on something that you were going to either invest in or advocate or do any of that, and it worked really, really well. Now, you also have to be willing to take the hits.
Somebody once asked me, "How did you manage to be successful in asset management," and I said, "Because I became absolutely comfortable with going from genius to moron, moron to genius, to back to moron, back to genius, back to moron." And it amazed me, though, and I was taken aback when something that I had done was attacked pretty viciously by the financial press, et cetera.
We had started a company called Netfolio in 1999, which the byline there was we were going to offer personal funds as opposed to mutual funds. So because we were trying to develop this customized portfolio, too early for the technology available at the time, alas, but one of the things we did was we had run for open-end mutual funds, and we thought that personal funds conflicted with where we were evolving from, so we sold the funds. And phew, did the press ever go after me. We were in the internet bubble, and the funds that we had were dedicated to kind of small cap growth at large cap value, which were experiencing a winter unlike any winters I had seen because the yahoos of the era were soaring 1,000% often in a single year.
So no amount of logical argument could win them over, right? Yeah, because one journalist wrote, "Well, of course he's selling them because he no longer believes in his strategy because it's getting killed." And I went to that particular journalist and I said, "Well, if you look at it, if you compare the fund against its actual benchmark, a small cap growth benchmark, it's actually outperforming that benchmark, but you're comparing it to the NASDAQ. And so the ultimate thing that came of all that was sometimes you just got to take your licks and move on. But that path, I've talked to a lot of people looking for advice in starting a company, et cetera, and when I tell that story, they're like, "Oh, man, I'm not willing." "I'm not built to go through that," is something that I often hear. So tell me how we can build more people to go through that.
Michael Strong:
No, good question. And first, Nassim Taleb's Skin in the Game, usually I think of that as money, a financial stake. But I really like the reputational Skin in the Game, even being more serious and going back to your name, because yeah, a capable person can go broke, can go bankrupt and probably rebuild. So even as painful as it is to lose all your money, that's not as bad as destroying your reputation in a certain sense. And going back to Paul Ehrlich, Paul Ehrlich projected that the world was billion people are going to starve to death, whatever. He proactively supported a sterilization campaign in India. In some ways forcibly sterilizing people in India. It's one of the closest to genocidal things, and yet Paul Ehrlich still has a positive reputation in many environmental circles. So this is just crazy.
So going back to your notion of how do we develop more people? First, I think the reputation for alignment between predictions and outcomes. First, being willing to make predictions and to take responsibility for the predictions, whether it's money or reputation, either one, I think as an ethos that we need to really take seriously. Again, this is why academic peer review know, peer review doesn't matter. What matters is did you make a reputation and did that happen? I have tremendous respect for Bryan Caplan, the Economist, because he makes public predictions and he's mostly right, which gives him a lot of credibility. So I'm actually, I've advocated for prediction markets and reputational bets as a compliment to our existing academic reputation systems. Because until and unless we have better reputation systems, we're going to have harmful beliefs spread endlessly. Just a particular one that I care about. I do not question the fundamentals of climate change.
And yet the question is, should Africa remain poor because of the urgency of climate change? If people believe it's an existential human, humanity could die, or billion people could die, maybe we should keep Africans poor. It's a horrific thought, and I don't think that, and my wife would kill me. She's like, "No, we're going to go no matter what." Again, China and India are going as fast as they can. They want prosperity. Africa should be allowed to have prosperity, but the atmosphere around climate change debate in the public broad public is if you say anything, then all of a sudden you're ostracized. So going back to the truth-seeking, I would like to see a reputation market reputational bets on what's the balance between growth in Africa and various outcomes? I'll give you one.
I've dug into the literature. There's climate alarmist David Wallace-Wells who wrote Hot House Earth and so forth. He cites a paper on the massive number of heat deaths in year 2100. I read the academic paper he cites in that, it assumes no air conditioning now in 2100 in Africa. So yeah, empirical evidence that hello air conditioning dramatically reduces heat deaths happened in the US. Arizona used to be lot heat deaths. We got AC in the fifties, sixties, seventies, way fewer heat deaths if Africa or the Middle East or wherever where there is danger of heat is mostly people outside work, lots of issues. But still to start from a position, assuming we have no air conditioning, basically assuming Africans are as poor in 2100 as they are now... Wait, wait, wait, shouldn't we at least assume it's possible Africa could be prosperous in 2100?
So to have an atmosphere when we're not even allowed to have these conversations, and this is why I'm very interested in developing prediction markets and reputational bets with climate alarmists on African issues in particular, just have balance. Part of the research on these reputational bets and prediction markets, what it does is that, people when they're forced to make a very specific empirical bet that can be settled with objective empirical data, they often back down the rhetorical claims. All of us, probably even you and I, when we're just arguing maybe online or in the family or whatever, we probably get into hyperbole and say things that are a little bit more exaggerated in the reality, we're humans. It happens. But if it's like, "Okay. Now let's bet on that." Well, what I actually meant was then you pull it back a little bit, you become more specific.
Again, it's down to, if you're really staking something on it, we have a natural incentive to be way more careful. And as we become more careful, the other thing that happens is often two people on opposing sides often become much, much closer because when it gets down to the details, well, I didn't actually mean that many people would die. What I actually meant was... So you can see this process of where we align on a social norm of reputational betting and prediction markets as a huge credibility marker. I think we'll see a lot less rhetorical attacks on both sides. The algorithms on social media currently reward outrage porn, and it's a horrible thing. That's a whole other issue.
But if we have these systems... I'm very interested in systematic issues. Actually, I know two software developers who are developing better algorithms for truth-seeking and social media because as we have systems that incentivize accurate predictions of the future, I think we'll make better decisions. We'll be less politically hostile and we'll actually solve problems going back to, ultimately, I'm not part of that. I just want solutions. And the whole thing with predictions is which thing is going to work? And I think we can create a large movement around which thing is going to work. And as we develop systems for discovering that, again, good prodigious project is fabulous, I think so many downstream issues will be eventually solved. So that's not a detailed blueprint. But
Jim O’Shaughnessy:
Yeah. My friend Annie Duke says, the way to get people to back up way off is to say, "Want to bet?" Because if you, Think in Bets, the title of her book, you become far more measured. Ehrlich is a classic example of this. Wrong, wrong, wrong, wrong, wrong for his entire career, and still I would guess is better known than Julian Simon, who I think extraordinarily highly of. I read both of his books, the Ultimate Resource, which he said was human ingenuity. Sometimes I scratch my head, because you've got these two guys and you've got Ehrlich over here still lauded, still highly thought of. You've got Simon, a lot of people, even people who believe in free markets and human ingenuity, who's he? Who? I often get that response.
But you also mentioned climate change, and that's a great example. I like you, look at climate change as this is a serious problem. And that led me to actually change my view on nuclear power. I had been like everyone else, it seems anti-nuclear. And then as the climate change thing heated up, I was like, "Let me look into all these things that they're proposing, wind farms, solar, etc." And then nuclear energy just kept popping up. And I'm like, "Well, no, that can't be right," because my priors were Three Mile Island and all of the cultural opposition to nuclear power, which was emotionally based. And yet even today you'll run into people who are passionate about climate change. And then the minute you bring up nuclear power as net zero carbon, they'll be vehemently opposed.
And I've just taken to saying, "Well, then I don't think you're really worried about climate change. I think you have a different agenda here." And yet that seems to be the argument that we're circling here. I think, wasn't it Wittgenstein who said, "Don't look for meaning, look for use?" And that's how I operate. If we have a real problem, okay, let's solve it. Let's figure out how we can solve this. And yet it's been always fascinating to me to see people who I think of as highly intelligent, as deeply sincere in their beliefs. Immediately the shields go up and they're like, "You monster. You're in favor of nuclear power." And I'm sure that happens with quite a few solutions that actually work.
Michael Strong:
Yeah. No big time. Backing up a bit on the Annie Duke piece. So decision science of the Alliance for Decision Education, we actually have a course taught by the Decision Education Foundation who's close to them. Chris Spetzler is a leader of that. So we're teaching decision science to make more rational, better decisions within a framework that they've developed. And I think that should be a ubiquitous part of education. How do we make rational decisions? Going back to another point of how we do this, I love Paul Graham, founder of Y Combinator as an essayist as well. One of probably my favorite Paul Graham essay is Keep Your Identity Thin. And what means-
Jim O’Shaughnessy:
That's a great essay.
Michael Strong:
Yeah, it is. Insofar as we have identity attached to Republicans or Democrats or environmentalists or capitalists or whatever, then our identity is threatened when disconfirming information comes in. And then we have this tribal impulse to attack the information. And I think if we keep our identity thin about me and my family in pursuit of the truth, that's very simple, but I'm not part of this or that team. And just oddly, I have no interest in sports. And I know most especially most men love sports, team sports leave with me cold. But same thing with Republicans or Democrats. Okay. I don't wear this jersey, don't wear that jersey, don't paint my face like this. Then keep your identity thin and pursue the truth.
And I would say the whole thing about prediction markets and reputations forces you investing. I think a lot of entrepreneurs and investors have to keep their identity thin, at least with respect to their business. Because again, if you cannot be objective about the business opportunity and business challenges, you're going to die or you're going to go break out of business, whatever. So I think that kind of attitude, that's what we need to cultivate more broadly.
Jim O’Shaughnessy:
Yeah. I like you really don't care for team sports of any kind. I like college football, but that's for a different reason because my kids were interested. So that was fun. But the minute they graduated, I drifted away again. And the idea of keeping your identity thin, I think is incredibly important because the minute you attach your identity to a belief, which is probably wrong by the way. That's the other thing that I often do. I often remind myself that if you and I jumped in a time machine and we had already identified the dozen most intelligent humans on the planet. And we went back 500 years and we began a dialogue with them, we would quickly learn that most of what they believed was absolutely wrong. So why am I any different to the people 500 years hence, who if they jumped into a time machine and came back to now, we're probably wrong about many, many things? And if you constantly remind yourself of that, it leads to a far more open view of alternatives and other ideas.
Another thing, we're pretty deeply involved in AI and investment in AI companies, and one of the things that I love to do with it is create steelman arguments for views I disagree with. Because guess what? They actually do have a point. And I think trying to say that's, I don't remember if you were a fan of the old Saturday Night Live where the counterpoint and Dan Aykroyd. Jane Curtin would do this fairly reasonable Iteration of the view that she was supporting. And then Dan Aykroyd would look at her and say, "Jane, you ignorant slut." And make it all about argument on hominem and what a horrible person you are. And yet, just to finish out our conversation here, it seems to me that there is part of human OS that defaults back to all those things that we know are wrong. Arguing against the person instead of the idea. Strawmanning the opposition's point of view as opposed to steelmanning it. The evidence is overwhelming here. And despite this overwhelming eminent evidence, we tend to devolve yet again to Jane, you ignorant slut.
Michael Strong:
Well, I'm going to give Socrates a lot of credit here. I think human nature, I'm a big fan of Joe Henrik, and he talk about this [inaudible 01:32:11] to respect authority and respect to conform to the tribe. And there are really good reasons for that over evolutionary history. Over thousands or millions of years, we shouldn't be thinking for ourselves. But I think Ancient Greece in general, and Socrates in particular, one of the reasons he was put to death, or the reasons he was put to death were, procrastinating the young, that is not respecting the authority, and for not supporting the gods of the state, not conforming to the beliefs of the state.
And using reason independent of the consequence, vis-a-vis authority, even if we offend authority or even if we violate the norms of our tribe, that Socratic reasoning consistent and coherent pursuit of the truth, regardless of the extent to which we're violating authority and conformity has been the meme that's given us Western civilization. So that's why when people begin to shut me down for tribal authority reasons, I have a visceral reaction against them, like, "I'm going to pursue my reason. You're free to give me reasons. I want reasons, but you're not going to tell me I can't use my reason." And I think that heroic tradition again, Socrates, Galileo, John Stuart Mill, let us have our own autonomous conscience based on a reasoning abilities. I think that was, and should once again be a sacred tradition in our civilization.
Jim O’Shaughnessy:
I could not agree with you more completely. I always mispronounce her, Hypatia of Alexandria, I'm sure you're familiar with her. She was a polymath who was put to death by an angry mob, Christian as it turned out, early Christians, because she was, "Well, those beliefs are absolutely wrong. We're going to kill you." And obviously folks you mentioned same sort of thing. And yet it persists even into modern times. I was looking up scientists, thinkers, et cetera, who really did put their lives on the line to advance an idea that whose time had come. Victor Hugo, let's use him for a moment. And then I came across Barry Marshall. Are you familiar with Barry Marshall?
Michael Strong:
Don't think so.
Jim O’Shaughnessy:
So he won the Nobel Prize in medicine in 2005, and he won it because in part, because I think the early 1980s, he was convinced that the H.pylori was the cause of ulcers. At the time, all accepted medical opinion was no, no, no, no. Ulcers were caused by stress and all of these things. And nobody would hear them out. His papers were rejected, everything was rejected. And he was like, "You know what? I'm going to prove this." And he took H.pylori, of course, got gastritis, which he treated with antibiotics. And finally, they had to admit, "Well, yes, you're right."
And I also think of Semmelweis who discovered that washing hands reduced the death of mothers giving birth dramatically. He had all the data, all his doctors were vehemently opposed because at that point in the Austro-Hungarian Empire, it was seen as unmanly to wash your. But the thing that I always leave with is Semmelweis got into an altercation over politics, ended up being detained in an asylum. The guy who replaced him as the doctor overseeing the maternity unit at the hospital where he served, looked at all of the data, which was overwhelmingly convincing that washing your hands was a great way to reduce women's death rates and ignored it, rejected it, went back to the old habit of not having to wash your hands, death rates soared back to where they were and stayed there for 70 years before somebody came along and said, "Wow. What's this data?"
So I am absolutely a fan of what you are doing. And I think that the more we get into these positive outcome methodologies, the better society will become, not just here in the United States, but globally. But I also think that we want to always be very mindful of human OS. I'm just as guilty of human biases as anyone else because I happen to be a human, and understand that it's going to be a continual process and fight. And the best way you can do it is stay in the game, invest in, give money to, give support, to give everything you can to things you deeply believe in, understanding that many of them are going to be wrong and not work. It is not an excuse for not trying. So I absolutely applaud what you are doing. I think it will lead to much, much better outcomes for people. So for that, I salute you. Where can people find you who are listening or are watching?
Michael Strong:
Well, thank you. I'm at www.socraticexperience.com, that's my virtual school. I'm michael@socraticxeperience.com. I'm @flowidealism on X.com, Michael Strong in LinkedIn, and you can look at Socratic experience. That'll be me. And on Facebook, I'm the Michael Strong with a beautiful African wife named Magatte Wade. She's a celebrity in her own right. So follow me on all those platforms. I also have a Substack, Michael Strong's Entrepreneurial Solutions to World Problems. Invite people to follow there too.
And yeah, just to complement what you said, people like Barry Marshall and Semmelweis were the big heroes of intellectual integrity and courage. We also need systems like better algorithms, prediction markets, reputation markets, and we also need millions of, I'll call it small heroes. I think civilization is built on millions of acts of intellectual courage and integrity. Do you pile on the lynch mob of a particular person? Do you stand up for somebody who might have a bit of truth when there's a hostile mob? I think those millions of acts is what ultimately build civilization in addition to the heroes and the systems.
Jim O’Shaughnessy:
Yeah. I like your idea, especially of small heroes. Because that's what it really takes. But again, then you read Girard and you get all gloomy again, because human nature also seems to love a scapegoat. Well, Michael, this has been absolutely fascinating. If you've listened to or watched earlier versions of the podcast, you know that we always end with the same question for all of our guests. And the question is this, we are going to wave a magic wand and make you the emperor of the world. You can't put anyone in a reeducation camp forcibly. You can't kill anyone. But what you can do is we're going to hand you a magical microphone and you can say two things into it, which are going to incept the entire 8 billion people on the planet. They're going to wake up whenever their next morning is and think, "I just had two of the best ideas I think I've ever had, and unlike all the other times I'm going to act on both of these ideas." What are you going to incept in the world's population?
Michael Strong:
Beautiful question. First, that reputation with respect to predictions is the most important marker of intellectual credibility and not institutional status. That alone will do a lot. The second is that an agency and flourishing, creating our own life, being agents to our own life and our family is a path to happiness. And perhaps not if you're among the poorest half of the population, but I think the wealthiest half of the population have an opportunity to be happy tomorrow. Quit playing the status game. Enjoy what you've got. Gratitude. Marcus Aurelius, stoicism. Happiness is right there for all of us right now.
Jim O’Shaughnessy:
Amen. I love both of those. Michael, thank you so much. This has been wonderful. And till next time.
Michael Strong:
Thank you, Jim. It was been of delight.
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